UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Accelerating Ukraine economic divorce from Russia, Ukraine imposes a new duty on most imports from Russia, starting Aug. 1. The unspecified duty levied as a percentage of the value will apply to all imports, but five exceptions considered strategic: anthracite coal, coking coal, gasoline, liquefied gas, and pharmaceutical drugs.

In
addition, the Cabinet of Ministers banned all imports of cement and plywood
from Russia — $37 million of goods last year. The Economic
Development and Trade Ministry backs a wider import ban on Russian industrial
goods, fertilizers, food and vehicles. Prime Minister Groisman told the
Cabinet: “We will impose an embargo on goods that we produce today or that we
can replace.”

The
new duty and bans come as Ukraine’s trade deficit with Russia grew last year to
$4.4 billion, 38% of Ukraine’s overall trade deficit. Revenue generated
from the new import duties are to go to a new fund for “import substitution”
investments, Ukraine’s Cabinet of Ministers said. The decision also comes two
weeks before Russia imposes a series of restrictions on exports – largely energy
products – to Ukraine.

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During
the first quarter of this year, Ukraine’s overall trade deficit increased by
13%, compared to Q1 2018, to $1.5 billion, the State
Statistics Service reported Wednesday. Exports were up 7.4%, to $12.3 billion.
Imports were up 7.9%, to $13.7 billion. The EU took 43% of Ukraine’s exports of
goods and one third of its exports of services in the first quarter, the State
Statistics Service reported Wednesday.

Sales
of food to the EU increased by 24% during the first quarter. Exports hit $1.9
billion, giving Ukraine a surplus of $1.1 billion, according to Mykola
Pugachev, deputy director of the Institute of Agrarian Economics. By April 1,
Ukraine had fully used its annual EU quotas for honey, corn, sugar, apple juice
and grape juice. Separately, Hugues Mingarelli, EU ambassador to Ukraine,
told a conference in Kyiv on Wednesday: “I hope that there is an opportunity to
discuss the issue of quotas, especially in agriculture.”

“European farmers alarmed over EBRD’s loan to MHP” headlines GlobalMeatNews about European
Bank for Reconstruction and Development approval of a €100m loan to the
Kyiv-based poultry giant to acquire Slovenian poultry processor Perutnina Ptuj. European poultry farmers complain to Brussels
that MHP is using a legal loophole to flood the EU with their breast fillets.
MHP says its exports were up 47% Q1-o-Q1, to 93,000 tons. It does not say how
much went to the EU.

President-elect
Zelenskiy will inherit a low growth economy, according new GDP
numbers released Wednesday by the State Statistics Service. During the first
quarter of 2018, growth was 2.2%, down from 3.5% the previous quarter. Ten days
ago, the National Bank of Ukraine had forecast Q1 growth at 2.4%. Economists
forecast 2019 growth at 2.7-2.8%.

Igor
Khomoloisky, former owner of the PrivatBank, says the solution is to fire
Rozhkova and to pay him $2 billion compensation. Kolomoisky was
the primary media backer of Volodymyr Zelenskiy in his successful campaign for
president this spring. In the Zelenskiy camp, the
point person on PrivatBank appears to be Viktoriya Strakhova, a financial reformer who served as corporate secretary of the
bank for one year after its nationalization.

Rozhkova
predicts to Reuters that PrivatBank will top the agenda of the IMF review team
that comes to Kyiv next week. She warns thatif Kyiv courts keep ruling
against the central bank on PrivatBank, they will undermine the central bank’s
independence and encourage owners of the other 80 banks declared insolvent
since 2014 to challenge the regulator’s decisions.

An international standard audit of UkrOboronProm should start
“within 10 days,” Prime Minister Groysman ordered the
Economic Development and Trade Ministry on Wednesday. The audit was authorized
10 weeks ago in the wake of news reports indicating major procurement scandals.
Groysman said a country at war needs a corruption-free,
transparent and accountable military-industrial complex. “It is important for
us to understand how the concern Ukroboronprom functions,” he said at the
Cabinet of Ministers meeting. “Everything that is not secret there should be
open to people.”

Half of Ukrzaliznytsia’s stations generate only 2% of its
revenue, a rail executive says as part of a
campaign to pressure local governments to save 300 underforming freight loading
stations. About 46% percent of the network’s 1,700 stations and halts cost $300
million to service, but generate only $20 million in revenue, says Andriy
Ryazantsev, finance director of the state railroad. The world’s seventh largest
rail freight transporter, Ukrzaliznytsia has 23,000 km of track.

President Poroshenko signed into law
Wednesday Ukrainian language legislation that will have a sweeping impact on
business in the 2020s. All websites based in Ukraine and used to sell
products in Ukraine should have default Ukrainian versions, with content no
smaller than other language versions. In the service sector – restaurants,
stores and hotels – employees are to address customers first in Ukrainian. With
a few exceptions, all movies, shows and 90% of TV and radio should be in
Ukrainian. For publishing houses, half of all books printed each year should be
in Ukrainian. Fines start in 2022. Asters law firm has published
summaries, in English, Ukrainian and Russian.

Twenty EU-Ukraine projects in the Danube river corridor were approved by the Cabinet of Ministers Wednesday under the EU’s Danube
Transnational Program. With €5 million in seed money, the projects in transportation infrastructure,
energy, environment and tourism are to benefit communities of Zakarpattia, Ivano-Frankivsk, Chernivtsi and Odesa regions.

In a worldwide ranking of ‘cost-effective cities’ for foreign investment, Kyiv came in fifth and Lviv came in eighth, according to fDi Intelligence, a Financial Times unit. In this annual ‘smart locations of the future’ survey, the two Ukrainian cities made the top 10 rankings in the category of ‘cost-effectiveness.’ Kyiv came in after Skopje, Sofia, Kaunas, and Gdansk, rated on such criteria as: cost per square meter of class A office space, wages of skilled workers, price of hotel rooms, the tax rate on profits, cost of setting up a company, registering property rights, and connecting to electricity grids.–

From the Editor:UBN is a media sponsor for the Ukrainian ID conference next month in Kaniv, Cherkasy region. Known as the “Ukrainian Davos,” the conference runs June 7-8 with the theme “The Revolution of Values.” Last summer, I participated in this intellectual retreat and found it highly worthwhile. For more information or to register, visit ukr-id.com/en/#about_forum — best regards Jim Brooke – jbrooke@ubn.news.